When Apple (AAPL) first revealed the pricing of their Vision Pro virtual reality headset, there was no shortage of people shocked, shocked I tell you, at the notion of a $3500 device in that market. After all, Meta (META) Quest 3s are available at around $500, so why on Earth would anyone pay that kind of money for the Apple product? However, I have been contributing to Nasdaq.com for more than a decade now, so I have written extensively about Apple over the years and have seen most things Apple-related before. This situation is no exception, albeit regarding a different product. Regardless of the critics though, will the Vision Pro make or break Apple over the next few years?
The honest, if somewhat boring answer to that question is neither, but it is an important part of an ongoing shift that will be beneficial.
Critics of the Vison Pro’s pricing have been vocal, but then they usually are when Apple process something above the market. You don’t have to have an elephant like memory to think back to 2017, for example, when the iPhone X broke the $1000 barrier for a mobile phone’s retail price. There was no shortage at that time of people saying that that was a step too far and that Apple would alienate their customers and the stock would suffer as a result. The split-adjusted price of AAPL at that time was just under $40. Here is what it has done since:
There were two things that the critics got wrong at that time. Firstly, they underestimated the loyalty of Apple’s customers and how heavily they were, and are, invested in the brand. And secondly, they seemed to forget that when most people buy a new phone, they do so on an installment plan that is part of their phone bill. Thus, in the minds of buyers of the iPhone X, it didn’t cost $1000 at all. It just added an extra $5 or $10 a month to their bill; a price well worth paying to have the latest device.
The Vision Pro doesn’t have the second advantage to offset the price, or at least not yet, but it does have the first, as the reported early sales numbers indicate. There are no official figures, but most reports have settled on around 200,000 units in pre-sale orders, a number that was the bottom of the range for analysts’ estimates for sales of the product for the whole of 2024.
From an investor’s perspective that is enough to make the Vision Pro a winner in the short term. That is $700 million in revenue, a drop in the $386 billion ocean of Apple’s trailing twelve month sales, but enough to mean that the product is at least not a liability. Given Apple’s history, it is fair to assume that the price will drop in real terms over the next few years and/or that the prices of competing products will adjust up towards that of the Apple product. The Vision Pro may not look competitive now, but when what it offers becomes the accepted standard, it will be.
More importantly, though, it increases the diversity of products that contribute to Apple’s revenue stream. iPhone sales are still by far the biggest influence on Apple’s earnings and growth in the handset market is increasingly hard to achieve. I am not one who believes that they will fall precipitously, but P/Es up around 30 for AAPL do imply some growth and in order to achieve that, Apple has to increase revenue from sources other than phones. Adding another product that, based on early sales, could become a “must have” thing amongst a certain type of consumer is therefore a positive.
Overall, the point is that hand wringing and naysaying when a new Apple product is launched is nothing new and, so far, the Nervous Nellies have almost always been wrong. Apple understands its customers better than anyone else and seems to have a good sense of what they will pay up for and when to ease pricing to broaden their customer base. That said, though, while $700 million is a lot of money, it isn’t enough to substantially impact the value of Apple’s stock. So, the Vision Pro won’t make Apple’s year, nor will it break it. It is just part of an overall diversification strategy that is essential if the world’s largest consumer electronics company is to retain that position and continue to grow. That makes it a net positive, but not something that investors should get too worked up about at this point.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Martin Tillier
Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.
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